What Are Title Defects?

Along with facilitating the real estate closing process, one of the central roles of a title company is to run a search for title defects surrounding a property. A title defect, also referred to as cloud on title, is any factor that interferes with or prevents the proper transferal of property ownership from one party to another. Title defects may occur in various forms and generally impede the closing proceedings until resolved. To identify such irregularities, a title search is carried out by a settlement professional prior to closing. Read on to learn about some of the most common title issues and how resolution might occur to allow the real estate closing process to move forward.

Common Title Defects

Title defects can encompass a wide range of factors. However, some of the most common include:

-Liens

-Judgments

-Boundary disputes

-Unreleased deeds of trust

-Errors of omission/recording errors

-Forgery or fraudulent claims to property

-Missing or unknown heirs

-Incorrect probation of wills

-False claims of marital status

How Are Title Defects Resolved?

In order to close a loan on and take ownership of a property, the title must be rendered free and clear. The resolution approach for addressing defects identified during a title search depends on the type of cloud on title that has been identified. In some instances, such as recording errors, it is simply a matter of filing the correct information with the local government recording office. Other types of title defects, like mechanic’s liens, are absolved by financial means, or bringing a delinquent account up to date. Title defects may present more difficult circumstances, in some instances, and may require legal proceedings to resolve. An example of this type of defect might include undisclosed heirs or property/boundary disputes.

Safeguard Against Title Defects

While title defects are a blip in some real estate transactions, homeowners can help mitigate the risk of property or financial loss by purchasing Owner’s Title Insurance at the time of closing. This type of indemnity policy can remunerate the owner for certain costs associated with defending title or resolving title defects weeks, months, or even years after closing. 

For more information on title defects, title search, or the benefits of title insurance, contact the experienced team at Linear Title & Escrow. 

How to Prepare for Your Closing

The process of finding the perfect home is an endeavor full of excitement. But if you are buying your first house, you may be wondering what to expect from the time your contact is signed to the day you sit at the closing table. We have put together a few tips on how you can get ready for the big day. Even if you are not new to the home buying process, the information below can still be a good reminder of how to best prepare for your closing.

  1. Submit loan documentation promptly (and thoroughly). Without a doubt, mortgage application procedures involve quite a bit of paperwork. Promptly providing your lender the documents necessary for home loan approval can help make for a smoother experience. Throughout the approval process, the professionals involved in your real estate transaction may require information from you. Complying with such requests as quickly as possible can help prevent snags that may delay settlement proceedings.
  2. Order a home inspection. Once you and the seller have both signed the purchase agreement, it will be time to request a home inspection. When it is complete, you and the seller can then decide if repairs need to be made or whether you will purchase the property as is. 
  3. Have a realistic expectation of the closing timeframe. Home closings take place about 45 days or so (on average) after your contract is signed. But keep in mind, the closing date that is established early on is only a best estimate of when it will actually take place. In some cases, title defects may need to be resolved before the closing process can move forward, which can delay settlement. 
  4. Review your Closing Disclosure (CD) form in detail. Three business days before your scheduled closing, your lender will submit to you a CD form outlining the details of your loan and other relevant financial information. It is extremely important that you review this document and notify your lender of any discrepancies right away. Any concerns must be resolved before the day of closing.
  5. Complete a final walk-through of the property. You will need to schedule a walk-through of the property a few days before your closing date to ensure it is in its agreed-upon condition. 
  6. Prepare closing costs in the form of wire transfer instructions or certified check. Before your closing day, the title agent conducting your settlement will contact you with the final figures you will owe to close on your new home. You will be asked to provide these funds via a wire transfer or certified check.

Being prepared for your home closing can help minimize any stress and streamline the settlement process. For more information on how you can best prepare for your upcoming home closing, please contact the experienced professionals at Linear Title & Escrow.

Owner’s Title Insurance: Standard vs. Enhanced Policies

Protecting your real estate investment against the risk of title defects is important, regardless of the age of the property. Title insurance is a type of indemnity policy that helps guard your financial interests and ownership stake should title defects be discovered after closing, giving another party plausible rights to your property. Most mortgage lenders mandate that homebuyers purchase a lender’s title insurance policy to protect the financial institution’s interests should the loan become unenforceable. Owner’s title insurance, however, is not required – but it is highly encouraged. 

How Can Owner’s Title Insurance Protect Your Interests?

Purchased at the time of closing, owner’s title insurance can offer financial reimbursement should ownership claims by another party, such as an undiscovered heir, lead to the loss of your property. An owner’s policy may also cover the cost of litigation should you be required to defend your property rights in a court of law. There are two types of owner’s title insurance, known as standard and enhanced policy, that offer varying levels of coverage. Read on to learn more about the differences in these plans and how each might protect your financial and real estate interests.

What Is the Difference Between a Standard and Enhanced Owner’s Title Insurance Policy?

When purchasing owner’s title insurance, you have the option between a standard or enhanced policy. While both cover certain types of common title defects, an enhanced policy provides coverage for a wider range of title problems. It is essential to understand the similarities and differences in these plans to help you decide the best option for your personal needs.

Similarities 

Both of these policy types provide coverage for:

-Land rights (such as easements)

-Ownership rights (including liens or heirs)

-Lack of vehicular or pedestrian access (only legal access is covered with standard policies)

-Unmarketable title (resulting in an inability to obtain a loan or sell the property)

Differences

Enhanced policies offer more extensive coverage, including title defects such as:

-Property encroachments

-Subdivision and zoning violations

-Damages resulting from the use of easements

-Restrictive covenant violations (existing)

-Post-policy forgeries

In addition, enhanced coverage increases 10% annually to reflect property value increases (up to 150%).

Additional Information About Owner’s Title Insurance

Owner’s title policy premiums are based on the sales price of the home and are paid at closing. In general, the difference in cost between standard and enhanced policies is typically only a few hundred dollars. 

Your home may be one of your greatest financial assets. Having an owner’s title insurance policy in place can help bring you peace of mind, safeguard your property ownership rights, and mitigate the potential for financial loss. For more information on standard vs. enhanced title insurance policies, please get in touch with Linear Title & Escrow today!

5 Common Questions About Title Insurance

Whether you’re new to the homebuying process, or even a seasoned buyer, you likely have several questions about title insurance and how it works. Title insurance is an indemnity policy protecting mortgage lenders and homeowners against monetary loss if post-settlement title defects surface or the loan is deemed unenforceable. Read on to explore some of the most commonly asked questions and answers surrounding the topic of title insurance.

Lender’s vs. Owner’s Title Insurance

Before delving further into these FAQs, it important to understand that there are two forms of title insurance: lender’s vs. owner’s. While lender’s title insurance guards the economic stake of the loan or mortgage company, an owner’s policy protects the homebuyer’s ownership rights and financial interests in the property. For more in-depth information, please visit our Title Insurance page.

FAQs About Title Insurance

Title insurance is integral to the homebuying process for many individuals. To help you understand more about this topic, we have listed five commonly asked questions and associated answers about title insurance:

What Is Covered by Title Insurance?

An owner’s title insurance policy covers court costs or other legal fees incurred should you need to defend your property rights. This may include protection against someone making an ownership claim to your property or other types of title defects. A lender’s policy covers the monetary investment made by mortgage lender if a title defect or other event renders the loan invalid. 

Are Title Insurance Policies Required?

Mortgage lenders almost always require homebuyers to obtain a lender’s policy as part of the home loan process. While purchasing an owner’s policy is entirely up to the buyer, this form of title insurance coverage is highly recommended. 

How Are Title Insurance Costs and Coverage Amounts Determined?

The cost and coverage amounts for owner’s title insurance policies are determined according to the selling price of the property, while lender’s policies are dependent upon the amount of the home loan.

Who Covers the Cost of Title Insurance?

A lender’s title insurance policy is the financial responsibility of the homebuyer. The homebuyer also cover’s the cost of an owner’s policy; however, a portion of this amount may be negotiated within seller concessions, if applicable. 

Do I Need a New Title Insurance Policy If I Refinance My Loan?

An owner’s policy will be effectual for as long as the property remains in your legal possession. Mortgage lenders will require you to purchase a new policy if you decide to refinance your loan, but this may be offered at a discounted rate. 

For assistance in navigating the homebuying process and understanding how title insurance applies to your real estate transaction, please contact Linear Title and Escrow today.

What to Expect With Closing Costs

When it comes to closing a real estate transaction, it is important to have a solid understand of the settlement process. Closing costs are the fees due (financial responsibilities) by both the buyer and the seller at the time of sale and vary according to a number of factors. If the prospect of buying or selling a home is in your near future, you may be interested in learning what your associated settlement expenses might entail.

How Are Closing Costs Determined?

Closing costs are determined based on loan amount, taxes, mortgage insurance, and other fees. For buyers, closing costs generally average between 3 – 6% of the total purchase price. Seller costs are derived from deed preparation and other administrative fees and typically hover around 6 – 10% of the sale price, with bulk of these expenses resulting from real estate commission. 

What Do Closing Costs Include?

While total closing costs may be unique to each individual sale, buyer and seller settlement fees generally include the following:

Buyer closing costs:

   -Mortgage insurance, origination fee, and loan discount points (if applicable)

   -Home appraisal fee

   -Homeowner’s insurance

   -Title search and recording fees

   -Transfer taxes

   -Property taxes

    -Lender’s and owner’s title insurance

    -HOA fees (if applicable)

    -Boundary survey fee (if applicable)

    -Other settlement/administrative expenses

Seller closing costs:

    –Loan payoff amount

    -Agent commission

    -Property taxes

    -Deed preparation and courier fees

    -Title transfer and recording fees

    -Home repairs (if applicable)

    -Seller concessions (if applicable)

    -Other settlement/administrative costs

For more information about closing costs or the settlement process in general, contact Linear Title and Escrow today!

New to the Home Buying Process? 11 Terms to Know

Let’s be honest: there’s possibly nothing that simultaneously generates equal levels of excitement and anxiety quite like buying a new home (especially if you’re a first-time home buyer). But doing your due diligence and arming yourself with the knowledge and education of the home buying process can quell some of those nerves and help make certain you make the right moves along the way. Following are eleven terms central to the home buying process that are important for you to know and understand.

  • Earnest money deposit: Formerly referred to as a “good faith deposit,” earnest money is generally a small amount of money given to the seller from the buyer at the time of contract submission to show their serious intent to purchase the property. Once submitted, these funds are typically held in an escrow account by the title company (or other third-party, such as an attorney) and applied toward the down payment on closing day.
  • Contract ratification: This term refers to the point in the real estate transaction where the contract (and associated terms) have been agreed upon and accepted by both parties, but has not yet been signed or put into effect.
  • Home appraisal: In order for a lender to approve a loan/mortgage request, a proper appraisal by an independent third party must be conducted. The appraised value of the home is generally the loan amount amount up to which a lender will offer funding.
  • Home inspection: A home inspection is also performed by an independent third party contractor and is executed to identify any obvious or potential issues with the home that may impact its value. These concerns may be structural, such as pertaining to the roof, or aesthetic in nature.
  • Closing: The signing of documents in the transfer of title on real estate from one party to another is known as “closing” on the loan and is also referred to as “settlement.” On average, the closing process (from contract ratification to close) is between 45 – 60 days.
  • Closing Disclosure (CD) Form: This document includes details of the loan, the buyer’s financial responsibilities to the lender, and other information surrounding settlement on the property. The lender will send the CD Form to the buyer at least three business days prior to closing and should be reviewed by the buyer thoroughly upon receipt. Any inaccuracies or discrepancies regarding the information contained in this document must be addressed and resolved before closing on the loan.
  • Closing costs: Expenses paid by the buyer and seller during the real estate settlement are known as closing costs.
  • Title search: Title is the collection of rights surrounding a piece of real estate that establishes legal interests to such property. Before initiating the closing process, a title agent will conduct a title search to identify any circumstances that may interfere with the proper transfer of legal possession from one party to the next.
  • Title defects: Any factors that prevent the marketability or transfer of title are referred to as title defects. Some of the most common title defects include fraud, liens, forgery, and recording errors.
  • Title insurance: This is a type of indemnity insurance that protects the lender or owner against financial loss due to title defects discovered after the loan has closed. Lender’s and owner’s title insurance are different types of policies and carry independent costs. Lender’s policies are almost always required while owner’s polices (though not required) are highly recommended.
  • Seller concessions: Contributions to closing costs made by the seller on behalf of the buyer are known as seller concessions. These contributions can help lower the overall out-of-pocket costs for the home buyer.

At Linear Title & Escrow, our experienced team is always ready to answer your questions and guide you through the closing process. To learn more, contact us today!

What Factors Can Stall the Closing Process?

Perhaps nothing equates to the excitement of moving into a new house, whether it is your very first abode or your dream home. If you are in the process of purchasing a home, you are likely counting the minutes until your closing day. On average, the real estate settlement process takes about 45 – 60 days, barring any snags on the path to closing. To gain a realistic expectation of the time it takes to go from contract to close, it is prudent to be aware of factors that could potentially stall the closing process. Read on to learn about possible closing hiccups of which to be aware.

Title Defects

Title defects are issues that have the potential to delay closing proceedings. There are a range of title defects, or glitches in the proper transfer of property from one party to the next, which can most certainly slow the process. Your title agent will run a thorough title search on the property to screen for and identify any concerns that may interfere with this ownership transfer and work to resolve any issues as quickly as possible. Some of the most common title defects include:

– Unpaid taxes

– Liens or judgments

– Unknown heirs

– Boundary disputes

– Recording errors

– Improperly probated wills

– Unknown encumbrances/easements

Communication Roadblocks

Maintaining open lines of communication and transparency throughout the entire settlement process is imperative for all parties involved and to the common goal of keeping the closing process on track. Communicating with the appropriate person as quickly as possible to address any concerns is essential. Responding to information requests or other needs can help streamline the proceedings and work toward meeting that target closing date.

Appraisal Delays

Any repairs that are inadvertently undervalued or overlooked by home appraisers may need to be satisfied prior to closing on the loan, as enforced by the lender. Some of these issues may include cracks or leaks in the roof, interior or exterior painting needs, or problems with the HVAC unit.

Incomplete Paperwork

Missing, incomplete, or delayed paperwork will slow the funding of the loan – and ultimately the real estate settlement process. Such necessary documents may include home inspection verification, homeowner’s insurance, and other loan approval information and paperwork.

How You Can Help

As a potential homeowner, you may be wondering what you can do to facilitate the closing process and help to zero-in on that targeted settlement date. Apart from submitting all information/documentation requested by your lender as quickly and thoroughly as possible, it is important to remain in close contact with your real estate agent and title agent. These professionals can help you navigate the process and keep you apprised of any snags that may require your attention. Be sure to review your Closing Disclosure (CD) form in detail upon receipt, which should be remitted to you no later than three business days before your closing date. Any questions or discrepancies concerning this essential document should be addressed prior to the day of settlement. By remaining abreast of the settlement procedure, you can help to foster an efficient, smooth closing process.

Do you have other questions about the closing process? Reach out to the Linear Title & Escrow team today!

Is Title Insurance Necessary?

Real estate is a major financial commitment for most Americans and one of the most valuable assets to own. To protect such an investment, many homebuyers opt to purchase title insurance, which helps safeguard against financial loss in the event title defects surface after closing. While lenders generally require homebuyers to purchase a “lender’s” title insurance policy, “owner’s” title insurance is entirely optional – but highly recommended. Here’s why.

Clouds on Title

Title defects, also referred to as “clouds on title,” are obstacles preventing the proper and full transfer of ownership from one person to another, giving one or more parties some sort of claim, rights of use, or value of possession in a property. There is a wide array of title defects that can exist, but some of those most common include unreleased deeds of trust, clerical or recording errors, improperly probated wills, and judgments or liens. Any type of title defect, no matter how seemingly minor, can stall the closing process and interfere with a real estate sale.

Lender’s vs. Owner’s Title Insurance

Mortgage lenders almost always require homebuyers to purchase a lender’s title insurance policy, which protects the financial institution against loss that may arise from the discovery of title defects after closing or if the mortgage becomes unenforceable for any reason.

Though owner’s title insurance is not mandated, it is generally recommended for the majority of homeowners. An owner’s policy can cover legal costs should it become necessary for a homeowner to defend their property rights in court. It can also remunerate the policy holder if they lose the property to another party over such enforceable property rights. As a one-time payment, an owner’s policy is purchased at the time of sale and covers the homeowner for as long the property remains in their possession. Owner’s title insurance policies are typically valued at the original purchase price.

Get the answers to your title insurance questions today! Contact our experienced team at Linear Title & Escrow to learn more.

What You Need to Know About Closing on a Refinance

With interest rates still among the lowest in recent years, refinancing your home loan may be something you wish to consider. Refinancing a mortgage can be beneficial in a number of scenarios, from reducing interest rates and monthly payments to replacing one type of mortgage product with another that better serves your needs. Some homeowners even refinance to cash out a portion of the equity accrued in their properties.

If you have never refinanced a home loan before, you may be wondering if and how the closing process differs from the initial sale. Read on to learn what you need to know when preparing to close on your refinance loan.

Refinance vs. Initial Sale Closing: What Is the Difference?

Some people are surprised to learn that refinancing an existing mortgage still requires the formal process of a settlement, or closing. While there are a number of general similarities between closing on an initial sale and a refinance, the process of refinancing differs in a few ways:

• Time: Though the same number of steps must be taken during the loan approval process, the time from application-to-close is slightly faster with a refinance loan when compared to the initial sale. On average, the timeframe is between 30 – 45 days.

• Closing Costs: While you will still be responsible for closing costs when refinancing your mortgage, the overall percentage may be less than what you paid during your initial purchase. Refinance loans generally carry no fixed costs.

• Title Insurance: If an Owner’s Title Insurance policy was purchased at time of sale, then a re-issue rate is given on the Lender’s Title Insurance policy for the refinance loan.

What to Bring to the Closing Table

Closing day is generally the same, whether you are purchasing a home or refinancing an existing loan. The items you will need to bring to your refinance closing include:

  • Government-issued identification
  • Certified check (in the exact amount due)
  • Proof of homeowner’s insurance

Have other questions about closing on your refinance loan? Get in touch with the team at Linear Title & Escrow today!

What Occurs When a Title Defect Is Found?

In real estate, a title defect (also referred to a “cloud on title”) is an issue interfering with the proper transfer of property ownership from the seller(s) to the buyer(s). During the settlement process, the title agent or closing attorney will conduct a thorough title search, reviewing the history of the deed through public records to determine if any other parties have any ownership stake in the property.

What Is a Title Search?

A title search also seeks to reveal if any liens or other claims against the piece of real estate are in effect. The overarching purpose of a title search is to identify such concerns and allow for the resolution of title defects, which is necessary loan settlement can occur.

Common Title Defects

Title defects may involve a wide range of encumbrances. Some of the most common defects include errors or omissions on public records, improperly probated wills, unidentified heirs, mechanic’s liens, tax liens, unpaid mortgages, and unknown easements, among others.

Title Resolution

When title defects are discovered, the title agent initiates a remediation process to resolve the defect and render the title clear and free. While some types of clouds on title are corrected quickly (such as errors in public records), others may require more research, time, and even court proceedings to rectify.

The type of defect dictates the course of action taken to resolve the issue. In many cases, however, title problems are amended via the recording of a supportive or corrective document that supplies the accurate information and releases the encumbrance. (A quit claim deed is one such type of document.) Title defects that surface in the form of liens, judgments, or defaults on mortgages must be paid and receipt of payment must be submitted and recorded.

Protect Your Interests With Title Insurance

Though titles agents work diligently to conduct a thorough title search, there may be unidentified or unforeseen defects that surface after closing. The best way for homebuyers to protect their financial interests and prevent the loss or real property is through an Owner’s Title Insurance policy. This indemnity policy remunerates the homeowner in the event that a title defect arises and they subsequently lose their interest in the property. It can also cover the costs of defending their ownership stake in a court of law.

For all of your title needs, questions, and concerns, contact the knowledgeable team at Linear Title and Escrow today.